US auto dealership chain to trim inventories

Ford Motor Co on Thursday said it plans to cut North American production in the second half of the year in response to signs that US vehicle sales growth is leveling off.Reuters | July 30, 2016, 16:58 IST

AutoNation Inc Chief Executive Mike Jackson told Reuters the US auto dealership chain will continue reducing stocks of unsold vehicles at its stores, responding to signs that US vehicle sales growth has hit a plateau.

"We still have work to do on inventory," Jackson told Reuters after the company reported second-quarter earnings from continuing operations of $1.08 per share, up 8 percent from a year ago and a quarterly record.

AutoNation shares were up about 1.5 percent at $52.88 in trading late Friday morning on the New York Stock Exchange.

AutoNation has about 70 days worth of vehicles in inventory at the current sales rate, Jackson said. "We could get that down to the mid-60s."

Jackson said the US auto market has plateaued at a high level, and that requires dealers and automakers to "manage the business differently" after years of strong growth.

"There's collateral damage from overproducing" and relying on deep discounts and aggressive leases to prop up sales volumes, he said.

Jackson praised General Motors Co for "behaving so disciplined and rationally." GM has cut back on bulk sales to rental fleets this year, reducing the supply of lightly used vehicles that could drive down used car resale values.

Ford Motor Co on Thursday said it plans to cut North American production in the second half of the year in response to signs that US vehicle sales growth is leveling off, and could decline next year. Ford shares fell more than 8 percent after it warned its full-year profit outlook was at risk, but were up slightly in Friday trading.